Wunderlich's Outlook For American Eagle

In a recent report by Wunderlich Securities, analysts reiterated their Hold rating on American Eagle Outfitters AEO and set a $11.00 target for the stock. After a generally upbeat day of presentations at the 2015 ICR XChange Conference, analysts are cautiously optimistic about the prospects for American Eagle.

Strong Holiday Performance

American Eagle notched positive average unit retail (AUM) numbers over the holiday season, and the company’s strong performance led to nearly flat year-over-year comps (best among its Teen-targeted peers).

E-commerce Growth Potential

Analysts see opportunity for online revenue growth, including international sales and in-store pickup. In addition, they see major potential for social media marketing campaigns targeting the company’s prime teen demographic.

Pricing And Margin Opportunities

Despite disappointing performance in recent years, analysts believe that aspects of the American Eagle brand remain strong. The company’s reputation as “king of the teen denim market” provides both credibility and pricing power. If American Eagle can generate the same type of excitement around the rest of its product lines, analysts believe that further increases in AUM can be achieved down the line.

Analysts see financial advantages to several recent operational changes as well. “Merchandise margins [are] not the only driver to higher margins, as closing weak stores, shifting the mix to outlets and online, and SG&A leverage from positive comps can also be a key driver.”

Outlook

Analysts believe that American Eagle is in position to capitalize on opportunities in the teen market, and they believe the company’s plan to return to a prominent position in the space is a realistic one.